Medicare Payment Thresholds for Physical Therapy Services

As a clinician or physical therapist, you must understand the payment limits set by Medicare to ensure your billing is both accurate and compliant. Knowing the details behind these thresholds is essential, as Medicare establishes a specific ceiling for outpatient therapy services. In recent years, changes to the Medicare physical therapy cap have altered how services are billed once a patient reaches a preset dollar amount. 

You will find that this cap is now managed with an exception process that confirms additional services are medically necessary. With the cap now described as a threshold rather than a hard limit, you are expected to document the need for extra sessions using proper modifiers. 

Being clear on the Medicare physical therapy cap and when to add the required modifiers helps avoid claim denials and payment delays. This blog will provide a step-by-step guide on the evolution of these thresholds, current regulations, and how to track patient progress. 

What is the Medicare Payment Threshold?

You first need to understand that the Medicare Payment Threshold defines the dollar limit of outpatient therapy services under Medicare Part B. This threshold indicates the amount of therapy services for which Medicare will pay without additional verification. When your patient’s treatment costs approach this monetary limit, you must submit claims with the appropriate modifiers to certify that further therapy sessions are medically necessary.

Key points include:

• The threshold applies to outpatient services provided in a variety of settings.
• It serves as a marker rather than an absolute cap.
• Claims exceeding this threshold require extra documentation to ensure continued payment.

By knowing where this limit lies, you are better equipped to plan treatment sessions and manage billing so that your practice continues to receive payment for services that extend beyond the normal threshold. 

With a clear definition in place, you now shift your focus to the background and evolution of these thresholds.

History of Medicare Therapy Payment Thresholds

Historically, Medicare imposed a fixed cap on therapy services that many viewed as a barrier to extended patient care. Initially set under the Balanced Budget Act of 1997, this cap limited reimbursement for outpatient physical, occupational, and speech-language pathology services. 

Over time, repeated congressional actions transformed the strict cap into a more flexible annual threshold. You experienced years when reaching the cap meant that patients had to pay out of pocket, a scenario that often forced difficult choices in care provision.

Key historical facts:

• The cap was established in 1997 to control Medicare spending.
• Repeated moratoria allowed the cap to continue despite its limitations.
• In 2018, legislative changes replaced the hard cap with an exception process, confirming that additional services can be paid if documented as medically necessary.

Transition to Flexible Thresholds and Their Significance

The Bipartisan Budget Act (BBA) brought key changes in 2018. The "hard" therapy caps were replaced with annual threshold amounts. Now, instead of an absolute limit, there's a threshold that, when exceeded, requires therapists to add a KX modifier to their claims. This modifier serves as confirmation that the services are medically necessary and justified in the patient's medical record.

The shift to a threshold system is important because it allows patients to continue receiving necessary therapy beyond a set dollar amount, provided there's proper documentation. If services surpass the annual threshold, the KX modifier must be included on the claim, demonstrating the medical necessity of the services.

What is the Medicare Threshold for Physical Therapy in 2025?

PT reimbursement rates are facing a decrease, with the conversion factor dropping to $32.3465 from $33.29 in 2024. However, the therapy threshold is increasing to $2,410 for combined physical therapy and speech-language pathology services and $2,410 for occupational therapy services. This is an increase from the 2024 threshold of $2,330. 

The threshold for targeted medical review is set at $3,000 for the combined physical therapy and speech-language pathology services and $3,000 for occupational therapy services until CY 2027.

The $2,410 amount serves as a threshold, and when exceeded, providers can continue billing by attaching the KX modifier to each charge and documenting the medical necessity for the service.

A signed and dated physician order or referral can now fulfill the requirement for a physician's signature on a plan of care (POC). The therapist must document that they have sent the POC to the physician within 30 days of completing the initial evaluation. PTs no longer need to obtain the physician’s signature for the initial evaluation.

‍You will find that this cap is now managed with an exception process that confirms additional services are medically necessary. With the cap now described as a threshold rather than a hard limit, you are expected to document the need for extra sessions using proper modifiers.  Medicare Coverage for Physical Therapy

Current Therapy Payment Threshold Regulations for PT

In recent years, Medicare has established clear financial limits for therapy services. For instance, in 2024, the threshold amounts were set at a specific value that increased in 2025 to account for inflation and changes in the Medicare Economic Index (MEI).

Consider the following table for a comparison overview:

These numbers indicate the point at which you must begin to attach the KX modifier to your claims to continue receiving reimbursement for further services.

Indexing based on the MEI

The MEI adjusts reimbursement rates annually based on economic factors. This index ensures that the threshold amounts remain current with inflation and economic shifts. As you bill for services, it is essential to be aware that these figures may change each year. You should check the latest CMS guidelines to update your billing practices accordingly.

Optimize your practice's Medicare billing today! Discover how SpryPT's real-time eligibility checks and documentation tools streamline approvals above payment caps.

With the current financial limits and indexing explained, your next step is to review which services fall under these thresholds.

PT Coverage and Services Under the Threshold

The Medicare annual therapy threshold, formerly known as the "therapy cap," is a financial limit for outpatient therapy services covered under Medicare Part B. It is not designed to limit care access but ensures that claims exceeding the threshold are reviewed for medical necessity.

The therapy threshold applies to all Part B outpatient therapy services furnished in various locations, including services provided in critical access hospitals (CAHs). Should a patient's treatment in a CAH go past the threshold, the CAH must follow the soft cap exceptions process. The threshold applies to all Part B outpatient therapy settings and providers.

Therapy services received for multiple diagnoses during the benefit period all count toward the patient's threshold. When a new patient seeks treatment, it’s essential to determine whether they have received other therapy services during the current benefit period, as these services will apply to the threshold. To calculate a patient's progress, use the allowable fee schedule. You can also request a history of a patient's therapy services from CMS by contacting their Medicare contractor if the patient cannot provide this information.

Understanding the various components of Medicare is crucial for beneficiaries to make informed healthcare decisions.

The video "Get Started: Parts of Medicare" provides a concise overview.

Which Services are included in the Medicare Physical Therapy Threshold?

If services exceed the annual threshold amounts, claims must include the KX modifier to confirm that services are medically necessary, as justified by documentation. Medicare will deny claims for therapy services above these amounts without the KX modifier. 

The therapy cap applies to all Part B outpatient therapy settings and providers, including:

• Private practices
• Skilled nursing facilities
• Home health agencies
• Outpatient rehabilitation facilities
• Comprehensive outpatient rehabilitation facilities
• Hospital outpatient departments (HOPDs)

Are there any exceptions?

Providers can receive Medicare payments for services exceeding the therapy cap if:

• The services are reasonable and medically necessary.
• They require the specialized skills of a medical professional.
• Supporting documentation is provided in the patient's medical record.

To claim an exception, providers should:

• Submit claims with a KX modifier, indicating that the requirements for an exception have been met.
• Claims exceeding the cap without the KX modifier will be denied.

Now that you know what services count, you need to track and calculate patient progress relative to the threshold.

Tracking and Calculating Patient Progress

As you provide therapy, keeping an accurate record of charges against the threshold is essential. Monitoring patient progress in terms of accumulated therapy costs helps you know when you approach the limit. This careful tracking prevents unexpected denials and helps you prepare the required documentation ahead of time.

Methods for Using Medicare's Fee Schedules for Calculations

To accurately calculate a patient's progress toward the therapy threshold, you should determine whether the patient has received any other therapy services during the current benefit period, as these services would apply to the threshold. The patient's progress toward the therapy threshold is calculated using the allowable fee schedule. 

The Medicare fee schedule determines the medical reimbursement rates, a comprehensive list of maximum reimbursements for healthcare providers based on Healthcare Common Procedure Coding System (HCPCS) codes that identify specific services and procedures. 

The Medicare Physician Fee Schedule (MPFS) uses a resource-based relative value system (RBRVS) that assigns a relative value to CPT codes. The components of the RBRVS for each procedure are the professional component, technical component, and malpractice component.

Key aspects of calculating payments using Medicare's fee schedules:

• Medicare Fee Schedule: Use the most up-to-date fee schedules to ensure accurate calculations.
• MPPR: Be aware of the Multiple Procedure Payment Reduction (MPPR), where subsequent units of a single code may only receive a fraction of the full value. This applies to "always therapy" services.
• Geographic Location: Recognize that reimbursement rates can vary significantly by location.
• Conversion Factor (CF): The CF, updated annually, is a national dollar multiplier used to convert geographically adjusted RVUs to determine Medicare-allowed payment amounts. CMS publishes an estimated CF applicable to Medicare payments for physician services for the following year. 
• Outpatient Therapy Fee Schedule Calculator: Use APTA's calculator to determine your payment for services under Medicare.
• Online Calculators: Online calculators are available to assist with Medicare fee schedule conversions.
• Multiple Procedure Payment Reduction (MPPR) Scenarios: Understand how MPPR reductions are calculated, especially when multiple therapy services are provided on the same day. Full payment is made for the therapy service with the highest practice expense value, and payment reductions apply for any other therapy performed on the same day.

With patient tracking explained, let’s move to how you handle billing when you exceed the threshold.

Modifiers and Exceptions for Payment Threshold

When a patient’s therapy services exceed the threshold amount, you must attach the KX modifier to the claim. By doing so, you confirm that additional treatment is medically necessary. The use of this modifier acts as your attestation that the extra therapy sessions are justified by the patient’s condition.

Here are the steps involved:

• Check your cumulative billing to determine when the threshold has been reached.
• Attach the KX modifier to all claims for services beyond the threshold.
• Ensure that your documentation supports the need for continued therapy.

Suggested read: The Medicare Therapy Threshold and KX Modifier: Guide to Ensure Access Beyond the Threshold

Documentation and Criteria for Exceptions

It is not enough to simply add the KX modifier; you must also provide detailed documentation that explains why additional sessions are required. In your clinical notes, include:

• The patient’s progress (or lack thereof) with objective measures.
• A clear explanation of why continued therapy is necessary.
• A summary of treatment goals and expected outcomes.

You can use bullet points for clarity:

• Objective measures: Range of motion, strength tests, pain scores.
• Clinical reasoning: Explanation of why further treatment is necessary.
• Treatment plan updates: Adjustments to the therapy plan based on patient response.

Advance Beneficiary Notice (ABN) and Financial Responsibility

If further therapy is not covered because it falls outside the definition of medically necessary services under Medicare guidelines, you must issue an Advance Beneficiary Notice (ABN). This notice informs the patient that Medicare may not cover the additional services and that they could be financially responsible for the extra costs. Using the ABN in your practice appropriately protects both you and your patient.

Utilization of the GA Modifier for Billing

When you submit a claim for services that go beyond the established payment threshold, you must include the GA modifier on the billing form. Using the GA modifier indicates that the additional services were provided after the patient received an ABN and that the patient may owe payment if Medicare denies the extra charges. This modifier helps the billing process by clearly marking those claims that involve services exceeding Medicare’s limits.

By following these practices, you can help prevent unexpected bills for your patients and avoid claim denials by clearly showing that the patient was informed of any potential financial responsibility. Having reviewed billing modifiers and ABN procedures, let’s explore the final section on medical reviews and compliance.

Medical Reviews and Compliance

When a patient's therapy costs exceed $3,000 within a benefit period, Medicare may subject these claims to a targeted medical review. This process focuses on providers who meet specific criteria, such as high denial rates, unusual billing patterns, or recent enrollment in the Medicare program. It's important to note that not all claims surpassing the $3,000 threshold will undergo review. Instead, Medicare selects claims based on these established criteria.

Compliance Strategies for Practice Management

To ensure compliance with Medicare regulations in your practice, consider the following strategies:

• Stay Informed: Regularly update yourself and your staff on Medicare Part B regulations, including billing guidelines and documentation requirements. This knowledge is crucial for accurate claim submissions. 
• Accurate Billing: Ensure that billing reflects the level and intensity of care provided by utilizing SpryPT’s integrated billing platform. Incorrect billing can lead to claim denials, underpayments, or investigations for fraud or abuse. 
• Thorough Documentation: Maintain detailed and accurate patient records, including measurable short- and long-term functional goals with SpryPT. This documentation supports the medical necessity of services and is essential if claims are selected for review. 
• Plan of Care Compliance: Establish and adhere to a clear plan of care for each patient, ensuring it is certified and recertified as required. This includes obtaining necessary signatures and updating the plan as the patient's condition evolves. 

With your compliance measures in place, consider how technology can support your workflow.

Consider integrating SpryPT into your billing workflow to save time and reduce the administrative burden on your practice. Check our pricing page for more information.

As you reflect on your practice’s billing process, remember that using the right tools makes your work more efficient and precise.

Conclusion

Understanding the Medicare physical therapy cap is essential for ensuring that your physical therapy practice remains compliant and that you receive payment for extended therapy services. By mastering these guidelines, including when to use modifiers and how to document medical necessity, you improve your billing accuracy and patient care outcomes. 

Always review your patient records thoroughly, and remember that accurate billing practices can help you maintain steady reimbursement. Embrace the changes in payment thresholds and use the strategies outlined above to protect your practice and support the care your patients deserve.

‍Learn how SpryPT's advanced tracking and modifier management keep your practice compliant with Medicare's therapy limits. With SpryPT’s user-friendly interface, you can easily monitor therapy sessions against the Medicare threshold and receive alerts when you approach the limit. Schedule a free demo today!